Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: HoodBuilder who wrote (31145)	12/12/1997 11:19:00 PM
From: Patrick Slevin	Respond to of 58727

Well, I got AMAT at 20 so I'm biased. But in a calendar spread like you have you have exposure you are ignoring. It's not a bad idea, but suppose Jan comes and goes and the stock you bought is below 25---or say it's at 25, no difference. You are out a dollar and a half on the stock...the puts are worthless ...the calls still have value and you theoretically should cover before you unload the stock. Your presumption is, you are making 0.875 net on the sale of the call. Meanwhile, you have 6 months of exposure --- or --cover the short call. Do you think...in January...the variance between what you paid for the stock....what you made on the put ... and covering the short calls...is worth 0.875? Maybe it will be, maybe it won't. Frankly, I do/have done the same thing with GE and have done it with XON and again and again. Often it does work....often it does not. There is a lot of 'sweat equity' in this kind of trade that will become apparent to you if you put this on.